Income taxes

9 Months Ended

Sep. 30, 2025

Income Tax Disclosure [Abstract]

Income taxes

Income taxes

The effective income tax rate including discrete items for the three and nine months ended September 30, 2025 was 24.34% and 23.58%, respectively, compared to 23.88% and 24.44%, respectively for the same periods in 2024.

For the three months ended September 30, 2025, the effective income tax rate was 24.50%, excluding the discrete items of amortization of the fair value adjustments associated with purchase accounting of $97 million and acquisition-related costs of $13 million, both related to the Kansas City Southern ("KCS") acquisition.

For the three months ended September 30, 2024, the effective income tax rate was 24.24%, excluding the discrete items of amortization of the fair value adjustments associated with purchase accounting of $90 million and acquisition-related costs of $36 million, both related to the KCS acquisition, and adjustments to provisions and settlements of Mexican taxes of $7 million recovery recognized in "Compensation and benefits".

For the nine months ended September 30, 2025, the effective income tax rate was 24.50%, excluding the discrete items of a gain on sale of an equity investment of $333 million, amortization of the fair value adjustments associated with purchase accounting of $287 million and acquisition-related costs of $52 million, both related to the KCS acquisition.

For the nine months ended September 30, 2024, the effective income tax rate was 24.75%, excluding the discrete items of amortization of the fair value adjustments associated with purchase accounting of $264 million and acquisition-related costs of $90 million, both related to the KCS acquisition, adjustments to provisions and settlements of Mexican taxes of $3 million expense recognized in "Compensation and benefits", and a deferred income tax recovery of $3 million on the Arkansas state corporate income tax rate change.

Mexican Tax Settlements

During the nine months ended September 30, 2025, the Company received final audit letters for Kansas City Southern de México, S.A. de C.V. (also known as Canadian Pacific Kansas City Mexico) ("CPKCM") for 2021 and a payment of $11 million was made in respect of that year.

2014 Tax Assessment

CPKCM's 2014 Tax Assessment is currently in litigation (see Note 14).